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This paper takes a new look at the long-run dynamics of inflation and unemployment in response to permanent changes in the growth rate of the money supply. We examine the Phillips curve from the perspective of what we call “frictional... more
This paper takes a new look at the long-run dynamics of inflation and unemployment in response to permanent changes in the growth rate of the money supply. We examine the Phillips curve from the perspective of what we call “frictional growth,” i.e. the interaction between money growth and nominal frictions. After presenting a theoretical model of this phenomenon, we construct
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Research Interests: Economics and Volatility
This Paper presents a reappraisal of unemployment movements in the European Union. Our analysis is based on the chain reaction theory of unemployment, which focuses on (a) the interaction among labour market adjustment processes, (b) the... more
This Paper presents a reappraisal of unemployment movements in the European Union. Our analysis is based on the chain reaction theory of unemployment, which focuses on (a) the interaction among labour market adjustment processes, (b) the interplay between these adjustment processes and the dynamic structure of labour market shocks, and (c) the interaction between the adjustment processes and economic growth. We divide the shocks into institutional variables, price variables, and growth drivers. Estimating a system of labour market equations for a panel of EU countries, we derive the dynamic unemployment responses to each shock. Our analysis permits us to distinguish between the short- and long-run effects of the shocks. Different shocks generate different degrees of ‘unemployment persistence’ (responses to temporary shocks) and ‘unemployment responsiveness’ (responses to permanent shocks). We find that the growth drivers play a dominant role in accounting for the main swings in EU u...
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The asymptotic distributions of cointegration tests are approximated using the Gamma distribution. The tests considered are for the I(1), the conditional I(1), as well as the I(2) model. Formulae for the parameters of the Gamma... more
The asymptotic distributions of cointegration tests are approximated using the Gamma distribution. The tests considered are for the I(1), the conditional I(1), as well as the I(2) model. Formulae for the parameters of the Gamma distributions are derived from response surfaces. The resulting approximation is flexible, easy to implement and more accurate than the standard tables previously published.
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We reconsider the central role of the natural rate of unemployment (NRU) in forming policy decisions. We show that the unemployment rate does not gravitate towards the NRU due to frictional growth, a phenomenon that encapsulates the... more
We reconsider the central role of the natural rate of unemployment (NRU) in forming policy decisions. We show that the unemployment rate does not gravitate towards the NRU due to frictional growth, a phenomenon that encapsulates the interplay between lagged adjustment processes and growth in dynamic labour market systems. We choose Denmark as the focal point of our empirical analysis and find that the NRU explains only 33% of the unemployment variation, while frictional growth accounts for the remaining 67%. Therefore, our theoretical and empirical findings raise doubts as to whether the NRU should play such a key instrumental role in policy making.
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Purpose – This paper aims to provide an account of the unemployment performance of two Nordic countries during their recent labour market booms and slumps. Design/methodology/approach – Based on the empirical models of Karanassou et al.,... more
Purpose – This paper aims to provide an account of the unemployment performance of two Nordic countries during their recent labour market booms and slumps. Design/methodology/approach – Based on the empirical models of Karanassou et al., we conduct dynamic simulation exercises and explore the determinants of unemployment. Findings – The analysis yields two main findings. First, the capital stock was
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This paper provides a new rationale for the positive effect of public capital stock on employment and wages. We show that higher levels of public capital reduce wages along the wage equation and enhance employment due to the resulting... more
This paper provides a new rationale for the positive effect of public capital stock on employment and wages. We show that higher levels of public capital reduce wages along the wage equation and enhance employment due to the resulting larger elasticity of labour demand with respect to wages. The estimation of a structural model for the Spanish private sector reveals
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Resumen Las asignaturas vinculadas al estudio de la macroeconomía suelen resultar especialmente áridas para los alumnos a causa del elevado aparato analítico necesario para el desarrollo del programa. Por ello, en este artículo proponemos... more
Resumen Las asignaturas vinculadas al estudio de la macroeconomía suelen resultar especialmente áridas para los alumnos a causa del elevado aparato analítico necesario para el desarrollo del programa. Por ello, en este artículo proponemos una práctica en la que (i) se contrasta empíricamente la hipótesis de convergencia; y (ii) se discute, utilizando el modelo de Solow y evidencia empírica asociada, una expli-cación de la no convergencia de algunos países. La finalidad última de esta práctica es facilitar la asimilación del modelo Solow a partir de un proceso de autoaprendizaje que permite al estudiante desarrollar competencias transversales tales como el conocimiento de bases de datos, el manejo de hojas de cálculo, y la organización de la información en forma de tablas y gráficos. Palabras clave: Modelo de Solow, convergencia condicional, crecimiento económico Resum Les assignatures vinculades a l'estudi de la macroeconomia solen resultar especialment àrides per als alumnes a causa de l'elevat aparell analític necessari per al desenvolupament del programa. Per això, en aquest article proposem una pràctica en la que: (i) es contrasta empíricament la hipòtesi de convergència; i (ii) es discuteix, utilitzant el model de Solow i evidència empírica associada, una explicació de la no convergència d'alguns països. La finalitat última d'aquesta pràctica és facilitar l'assimilació del model de Solow a partir d'un procés d'autoaprenentatge que permet a l'estudiant desenvolupar competències transversals tals com el coneixement de bases de dades, la utilització de fulls de càlcul, i l'organització d'informació en forma de taules i gràfics. Paraules clau: Model de Solow, convergència condicional, creixement econòmic Abstract Due to the complex analytical tools required, courses related to macroeconomic analysis are usually found arduous by students. It is in this context that we propose an applied coursework where (i) the convergence hypothesis is empirically tested; and (ii) using Solow's model and associated empirical evidence, the non convergence of some countries is discussed. The ultimate goal of this applied cour-sework is to facilitate full comprehension of Solow's model by means of a self-learning process leading the students to develop general cross-field skills such as knowledge on databases, use of worksheets, and the organization of information in tables and figures.